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New Report: EPA’s Clean Power Plan Will Not Cause a Significant Increase in Natural Gas Pipeline Needs

June 25, 2015 04:30
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Industry News

Modeling analysis finds that meeting emission targets will not cause major constraints on natural gas pipelines

[Washington, D.C. — June 25, 2015]: An analysis prepared by Advanced Energy Economy Institute using the models of Virginia-based ICF International, a leading authority on natural gas markets, finds that existing and planned natural gas infrastructure will be able to handle the bulk of future natural gas needs under EPA’s proposed Clean Power Plan (CPP). The analysis shows that additional natural gas pipeline expenditures under the CPP would be modest: 3% to 7% more than currently planned through 2030.

The report, Impacts of the Clean Power Plan on U.S. Natural Gas Markets and Pipeline Infrastructure, is available for download here.

This report responds to concerns raised by some stakeholders, including the North American Electric Reliability Corp. (NERC), that states might rely heavily on natural gas generation for compliance with the CPP, creating stress on gas pipeline capacity and ultimately impacting electric system reliability. These parties have suggested that addressing the concerns might require expensive expansion of natural gas infrastructure over a challenging timeframe.

Using assumptions provided by the AEE Institute, ICF International modeled a series of scenarios. The analysis looked at pipeline expansions between 2016 and 2030 without the CPP, and then determined the incremental capacity requirements prompted by CPP implementation. AEE Institute also directed ICF International to examine how unexpectedly low future gas prices - a “stress test” scenario in terms of pipeline requirements - could impact the results by increasing gas demand.

”With competition from renewable energy and energy efficiency, which are also cost effective, states are likely to adopt a diverse portfolio of measures for compliance rather than rely exclusively on increased natural gas generation,” said Malcolm Woolf, Senior Vice President for Policy and Government Affairs for Advanced Energy Economy (AEE), a national business association. “This report shows that, even if low natural gas prices lead to higher natural gas usage, pipeline expansions already planned and under way will be sufficient to handle most of the need. There is no reason to see natural gas pipeline capacity as a threat to electric system reliability as a result of CPP implementation.”

Natural gas demand has already increased dramatically over the past 10 years, in response to low natural gas prices, and there has been a corresponding expansion in pipeline infrastructure to accommodate the increased demand. The analysis finds that, “even without the CPP, ongoing changes in the U.S. natural gas market will require billions of dollars for new pipeline infrastructure over the next 15 years. About 70% of the projected infrastructure needed is already in the planning stage, prompted by dramatic growth in new gas supplies from areas like the Marcellus and Utica shales.”

Even so, the expected spending on natural gas pipelines that will take place over the next 15 years “will be less than the previous 10 years with or without the CPP,” the report concludes. “This is true even if gas prices were to remain particularly low over that 15-year period. In fact, incremental pipeline expenditures through 2030 are relatively low for both CPP scenarios, ranging from 3% to 7%.”

The report goes on to explain that the CPP case would actually result in lower natural gas utilization in the long run. “Under the CPP Case, there is a temporary increase in natural gas demand above the Reference Case due to the incremental shift from coal to gas. This incremental demand increase then declines over time as additional renewable energy and demand-side resources come online. Since this incremental demand is small, even if coal to gas switching becomes a more prominent compliance mechanism, as under the low future gas prices scenario, it would not cause a significant increase in new pipeline requirements” says the report.

About Advanced Energy Economy and the Advanced Energy Economy InstituteAdvanced Energy Economy (AEE) is a national association of businesses that are making the energy we use secure, clean, and affordable. AEE’s mission is to transform public policy to enable the rapid growth of advanced energy companies. The Advanced Energy Economy Institute is a nonprofit educational and charitable organization whose mission is to raise awareness of the public benefits and opportunities of advanced energy.